From GATT to WTO

Author(s): S. R. Sen
Source: Economic and Political Weekly , Oct. 22, 1994, Vol. 29, No. 43 (Oct. 22, 1994), pp.
2802-2804
Published by: Economic and Political Weekly

Stable URL: https://www.jstor.org/stable/4401936

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PERSPECTIVES

should no longer be contined onily to tarilf

From GATT to WTO and trade in goods but should ble alsoextende(d
to services. inivestment and intiellectual
S I? Sen
property rights and that thlrec should be a
WT() (Workl Trade Organiisati n) to ovwersee
all these four. Wheni tlih_ var-iOus allrgumelnts
I I; i1\ V evelopinig conllflries, which were not satisfied with the Tokyo
for and;l against such a frcmOricd CATT (or
Rilid oJ/GATT, hlad hoped thai thlrouigh thle Uruguay Roundc anendmenisWTO) was placeL Oil thle tale and sonic
theX niighlt he able to control thle rogue elephant, the US, willi itscompromise
arbitr(ry)seemed possible. the then
(lctions undit1er Arlicle 301 oJ its Triade Act. But now it appears thlat iflste(Id
directorgeneral ot'GAT'l)unkcl put f'orwar-d
(4 coniending witli one rogute elephant they will have to contend witlia dralt
a documenit of his own. known as
Dunkel proposals. With some moditications.
number of grasping octopuses in the shape of the tranisnational
these proposals were accepted hy atll the
corporaitions (TNCs). members of thlc GATT in Decemberh 1993
at the official level and in Mar-ch 1994 at
IN 1944. near the etnd of World War II. thle opposed by the US and some other important the ministerial level. Bult about a-w doien
Brettoni Woodls Conft'eence ma(le recom- tdevclope(d countiies (called the G-7: GIioup countries. includfing thlc LiS aindl Iatil. whilC
mcndatiolns to set up tilree interilational of 7 devcloped countries). At the outset signing the I )raft Agrecmcent put in the
oirganisations: (i) IMF (International Mon- several (levelopedl countries specially the res'ervation that tlie' would lnot r-illfV it tilitil
ctlrvy Fundl) to deal witlh balance ol'paymentsScandinavian countries wcrc vcr'y theirrespective: legislaturesaJ)pprovcd it. The
problems. (ii) World Banik (International svmpathietic to G-77. But some ol hlie WTo and its ancillariy aglccincits. c ,
Bank fr Reconstruction ain I )evelopment) ievisc(l GA1T (rcgardinLg taln1 1s an1d tr-ade
extr emistpositions tkck iby the G-77 pre.ssed(
to deal withi the problemis of reconstruetion by some inexpericicd leadlers of newly ahout goods inc luding ag,r icultural
idepen(lepnent countries made these liberalcommodities). GATS (regarding services),
ind (Iecvelopincnt. aindi (iii) ITO (Internation-
al Trade Oreganisation) to deal with piroh- developed countries to sidle witlh G-7. TRIMS (regarding inve.stm1ent) and TRIPS
lcms of intcirnational tradle. The first two Nevertheless. the pressure of G-77 nmade (regarding intellectua-l1 prope-ty r ights) ancl
wcre sct up) in 1 945 but there were seriousthe UNCTAI) gain in stature anid atonc time a provision for cross rctaliation hetwccn
controversiess ahout the third. Therefore the it appeare(d a s it it might replace the CATT. sectors f'or violation of the prescribed
UiS. UK a;nd( a few other countries set up in But the US strongly supported the GATT conditionalities are scheduledl to comc into
1 947 an interim organisation about trade and( it conitiniuci to be powerful. However.effect on .anuary 1, 1995 with a grace pcii id
nalmed GATT (General1 Agreementon Tariff'sustailined pressure of' G-77 maide GATT of one year f (!r the least lcvclopped cotici\it s
and Trade). In(lia was a founder membcr of progressively more liberal and ilhe Tokyo Jn theory tlhis vill happen evenl it somec
all the threc. A few year.s later, the Havana Round of the GATT gave a very important counitr-ics iniclu(dinig thle US whiichi lhad
Conference recommended the setting up of concess-ion to the developing countries, registered their reservatioi (lo nrot ratlfy by
ITO with the support of the US administra- namely, GSTP (General Scheme for Trade that (late. But the US is such an important
tion. But the US Congress refuse(d to ratify Preferences). country and a super power both politically
it. Thcrefore, the ITO could not be s-et up But neithle 0-77 nor 0-7 were content anIi economincally that if it dloes not ratity,
and the GATT was continued. All the thlree with this. Both lstarted pressing for further the WTO may hc still born now ais was the
organisationsC were donminate'd by the US. ameniment of the GATT. ITO four deca(les earlier. The US adminis-
The GATT, in particular. was biased in tration is iying hardl to mobil ise support for
favour of the developed countries and was URITGUANY RoITNI) the WTO in the US Congrelss but therc is
calledl informally as the "rich men is club". some diff iculty because mIalny of the
The Uruguay Rounid of discussions with Congressmen d1o not waint to give up Articl
UNCTAI) this purposc was started in 1986. The G-77 301 in the US Trade Act andl the sovereignty
maintainied its united pressure for a few of the US Congiress in trade maitte:rs. It is
The developing countries strongly years but the US exploited the differences expected that the US Congress will (lecidle
protested against the bias of the GA1T between different section. of G-77 countries, one way or the other by l)ccember 1994.
favourinig the developedl countries and C g. exporters. importers, oi l producing. newly In Indlia. ainother important countrv. there
demandeed that an ITO be set up. The UN ind(ustrialisetd countries. etc, to break up the is strong objcction to WTo in its present
appointed a committee in 1963 to consider unity of G-77. In this it used cleverly the form. The government is campaigninig very
how best this could be done bec.ause the US Super and Special Article 301 of US Trade hard for mobilising support in parliamelnt.
Congress was still likely to veto any new Act and various. (liplomatic, financial and Althoughl it hals requisite supportl in the I Lok
proposal for ITO. Thils UN Committee other pressures. Till 1989. the core GroupSabha, it has problems in thle Rajya Sabiha.
of C-77 led by India and Brazil was
recommended as a possible alternativc (as The basic issue in Inidia is the samc as in
suggested by the pr-esent writer, who was a
functioning quite effectively but in 1989 the US, namely. the soveireigin power ol the
member) a via media. UNCTAD (United India accepted unilaterally somp of theparliament (or the Congress). Many of the
Natioins Conference on Trade and Develop- proposals of the US. The result was that Indian MPs feel that the Tokyo Round was
ment), to be set up as a part of the UN India was isolated and the erstwhile better for the developing countries andi the
Secretariat to a'void being subject to veto by
supporters of India made their own Uruguay Round was a great surrender to the
US Congress. The UJNCTAI) was set up compromises
in with the US. developed countriies. The conditionalities
1964 on the basis of this alternative. Durinlg The emergence of US as the single super that the new GATT-94 (tiat is WTO) will
the negotiations for setting up UNCTAD. power after the hreak up of USSR greatly impose upoin lndia' s policies icgar.Iding
the developing countries establislhe(e an increasedl its clout. With prompting and agriculture andl intellectual propeirty righlts
organiisatioin. G-77 (Group of 77 developing strong support from TNCs (tranisnational in particular and the novel provision of cross-
countries), which was later joined by most corporations). which got specially interested retaliatioin betwecn quitc unreclatect sectors
ot the developiing countries. This G-77 was at this juncture. US pressed that GATT like goodls. services. investment andi patent

280)2 Economic and Political Weekly October 22, 1994

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rights wre (ldangerous traps for lhe WTO presented in the diagram needs careful usefulness. But in practice tlis will onlyl
dleveloping countr-ics. It will only help consideration. enable a ,small group ol pol tic jians.
It is a good thing that unlike IMF andi
strengthen the po-,)sition of the developed bureaucrats and TN('s to controt.l thc
countrics and(i thicir TNCs and retard the World Banik, the WTOkwill havc one couintry, develo)ping coutriL1iCes thl-rOghl tlheSe tll-Cr
dlesir:ed development of most of the onc vote. But if it depend(is on US and(i otther
organi sit ions.
,developing coutitries. This will bring neo- G-7 countries for bulk of its finanice. that
colonialism thlroughi the backdoor. advantage would he lost. TRANSNHALh CO)N OKAI')RAt 1 ONS

Thle GuJial Committee of Rajya Sabha In practice, WT(O is likely to he a very

Ihaid g)one v\ery carefully into the various powcrlul body. In co-operation With thc Tiis iew systCe is als l ikely lkclvto str enigtlhcn
pi.)posals madeitlc in tle D)unkel report whlicih IMF andl Worl(d Bank witlh their weighted veI-y considerably the lhllids of the
was the basiso f the new WT() agrecment. voting, it would virtually conitrol all the Transnational Co)rporations or TNCs. It
There arc niany validl points in that report smaller countries. It is likely t) rqCuirc a should niot hb forgot ten that these TNCs
but since India did not press these points much larger bureaucracy thaln thc others ha' wvorked very hard to co(-lnver't the Tokyo
befOcre the D)ecember 15. 1993 dateline, it which. combined withi the ahrea, ldv owcj eul Ri mIdll GATT to the Uruguay Round WTO.
was later (lifflicult to do anythilng in tie bureaucracies in IMF and Wt lid Bank
Unltil recently the power of tic TNCs was
dominated by the pr-incipal providersbeing
ot moderaiited( to some extenti by the bigger
According to an1 interpretation recentlyfinance. will virtually rulethc lcwrld in dlevelopinig counitriles, somne ol the aigclices
givei by the GATTsecretariat. all thi presentecllomic matterrs. Thler ar-c alr;eady ol the UNO like the UNCTAI). U'NI)P
imemnbers of GCATT- 1947 (as amcnded by the prolx)osals for fur'tlhcir expanding the rolc ol'UNII)DO FAo, etc. antd prcssure 4 ant
Tokyo) Rt)tiid) lhave threc alternatives to the WTO to thic splhcres ol labour anid hegcmtnony NGOs (nn 1-0gverneliliclntil
choo.Se fro1111: environmenit. In tleory. this may have somie organisations). But in lfutur- the big
(i) withdlraw frrom GAIT- 1947 once they
jil tc WT(). or Si' IKt' *'I'IR Of.' WTO
(iii mmciin;li1i aGATT- 1947 member-witiout
Ministerial Conferenlce
being a WT() mcmber, ori
(iii) remCin at GATT-1947 member and (Eveiy 2 years)
ailso) join the WTO.
In vicw ol th e concerns expressed by the Settlement GHI-N1,--RAL-CM1TNCIL Trade Policy
of Disputes Review
Gujral Coioniitlee ahbout WT( regarding
aigriculturall comnmodities. TRIPS, TRIMS.
c -oss r-etliationi, etc. tlhere ma.y be a casc for Committee on
Trade anti (C'(OUN(CIL (C)UNCI r ' iR j)s
India to opt for alternative (iii) for a trial
D)evelopmnent O)R FOR CO ' NCI I S
period of. say, two years. If the WT()
functions to its satisf action. it may thler-eaf'ter
SERVICES (; l)S (inlel prOp)
Committee ol,v
opt 0ralternative (i). If-not. it miay thier-ealfter
Baklance of
opt fOr alternative (ii). But it can (10 so only P~aymnent
If it ciain persuaiAde a ftairi number o)f oth(er-
important countieics to (lo tihc sane. ( )therwise
Comimittee on
it vill be vciy counterplro(luctiv: for India Buddget o* cimilttees .-ct ulp to administer the various arraneemients
to stay out of WT() in isolation.
However, eveni it linldia finds it niecessary
to opt for alterilnative (i). it should try toThe W() will:
mnobilise the supptort of at least two-thirds - Facilitate implemiienitationi and operation olf all the agreements and legal instruments.
(and if po!issible, of three-lourth.s) of all in connl1ection with the Uruguay Round
- Provide a lbruni lor all negotiatioIIs
icmember countries to guiard againist TNCs or
- Admtiinister the t Tnderstanding oII Rules anid Procedures Governing the Settlement o
a tfcw Veiny powerful cotintrieics using the and thle Trade lPolicv Review Mechanism
WT() to darmagc the vital development - Co-operate with the IMF and IBRI) with aview to clhieve greater coherence in globad
policies and(i programmes of the und(ter- policy-mlaking.
developed co(unitriies and the poore r section.sThe Preamble
of thcir population. The agreement establishing a WT( reiterates the objectives of GATT:
Raiising standard of living and incomes, ensuring full employment, expanding productioni
For thi.s it will be also necessary that not
trade, optimal use of world's resources, at the satne time extending the objectives to Se
only G-77 acts more unitedly thainl in 1990- and making themii more precise.
93 but also secur.es supporit fro()mn the mnore Ihumr d(uces the idea of Sustainable l)evelopment in relation to the optimiial use of world's resou
liheral dvcclo)ped countrics. Thereforc it aino the need to protect and preserve the environmenit in ai manner consistent with the v
would hc pru(lent for C-77 ct)untries to levels of national econiomilc developnieit.
Recognises the iieed for positive efforts desigined to ensure that developing couuntries, espe
move monre diplomai ltically thlani they did at
the least developed ones, secure a better share of growth in internationaf trade.
the time otl Ih UNCTAI) conferenice of
Decision-Making
1964.
TIhe WT1) will cotitinue the decision miaking practice followed under the (GAl1'.
The issues of agriculturc aind intellectual Decision by Consensus which is deeemed to exist if no member formially objects.
property riglhis have alrea(ly been discussed Recourse to voting, where at decision caninot be reached by consensus,, is now institutionalised
threadbare in India. Tlhrec arc both pluses whereas earlier it was exceptional.
and( mintuses.. The latter can be minimised 1)6cision ontinues to betaken by a majority of the votes cast on the basis of one country, one vote.
only through such action. In catse (l i,orpjretation of provisions of the agreemients aiid waiver of a memiber's obligations
the mia,kjonity required is three-tourths ot the members, unlike the ealrlier two-thir-ds ot the votes
calst represciting at least half of the members utider the GATT. 'Ihe igrantitig of waivers will
WTO he miiore strictly controlled.
Aniy miemiiber of WIO may submit a proposal to amend the provision.s of the Agreemnemits to
But one very imlporltant maitcr that his not the Ministerial Conference and the General C(ouncil. Thie quorum required to implemenit chaniges
will depetid oni the nlal<ture of thle amendimienits.
been1 given lltue atentlliont so0 far is theC
Amiiendmiienits relating to general principles such as MFN treatment miiust be approved by adl
compo3sitionand fI unlctionlinlg of thec WT(). mnemibers.
Inl thlis context the infor-mationl about the For all o)ther atniendmiienits oinly at two-thirds majority is reqluired.

Economic and Political Weekly October 22, 1994 2803

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bureaucracy of the WT() in close colltabo- developed couuntries, no such consideration said in the previous paragraph about
ration with its counterpart in the IMF inshould be expected from TNCs forthe simple financing and staffing should receive high
reason that the bureatucrats of TNCs will be
particular is likely to he much more powerful prlorlty.
than the preseint GA1T bureaucracy in less subject to democratic pressure. Thc Special attention should be paid to ensure
possibility of the TNCs ancl giant national
pushing narrfow trade and finiancial policies that the TNCs do not make the WTO a tool
for achieving their narrow objectives. To
coirpor-atioIns aIct(inr together shouldi sit not
at the possible expense of the broader social
considerations. he unider-estimat-ed. In a scentirio of minimise the growth of oligopoly. which is
The lobbying powerol the TN('s in Geneva unpredictable powerpolay. the bureaucratsa real of danger, not only from TNCs but also
and Washington. DCX with the WTO and WTO and IMFwill also hlve VLitelt .sitnilficant from giant national corporations. the anti-
LMFbureaucracics will he much reaterthan monopoly and restrictive practices law should
roles to play. If thicy haveonly nliriToW tralde
that of the developing countrics. es-pecially and financial considerations in view. they be made really effective, compulsory
the smaller ones amonig tlhemn. These lattermay tilt towards the giaint corporations. If licensing of patents should be enforced,
are likely toi find soon tilat tlihy are in a visethey have bro.ader social considerations in suppression oflpatents should be prohibited.
as it were of thlese bureaucracies withI little. view, thiey mav till towvards the peOple royalty
of for use of patents should be
freedom to pursue Lhcir owni socwial policies the deveioping countries and their govern- controlled, unetiical lobbying with local
for tie uplift oldlie po'r people anid backward niients. Amnong the important intermationalpoliticians and bureaucrats should be guarded
regions. The policies formulated aind pushed bureaucracies. th:at of the WT() is likely to against and reasonable transparency in
by the top echelon of the WT() bureaucracy have the greatestclout evcntually. How tlhat operations shbould be ensured.
may turn out to be in practice so many bureauci acy slhould be constituted and re- Most TNCs trv to present themselves as
Procrustean beds benefiting only tho.se cLuitecl needs therefo(re ur1 geinit con.iderati onMNCs. But any TNC which has majority of
countries who fit tiecm andi(i dainagingofall
all coniccrned leaders of public opinion, shareholding, directors and controlling
others w ho do not. pairliamenmts and goverlnments. execulives froml oinly onc country should not
Manyv developing countries. whliclh werce be called an MNC. Merely having factories,
notcoLolcntt w ith thic Tokyo Rowund ofG' Al'l TAvSK tsmR GA1TT m;anageriall staff anid collaborators in more
had hoped tlht through the Uruguay Round than one countrv does not convert a TNC
ametidncidts tlhey imiight be able to control It is now very imfiportant thalt G-77 should into ai MNC. 11 that wer- so. East India
tihe rogue elephaniat, the US. withi its arbi trary, unite once agalin. avoid tlhe cx tremism that Cornpany. Unitted FruitConpany, 1)e Beers,
actions undler Article 301 of its Tradec Act. it hald followed in 196.4 and Inohilise the Coca Cola, etc, would all hiav quailified to
But tow it appears thla insteadb (of lconteilnidiling support oft he liberal dev1loped ountrieS be calledel MNCs.
with one rogue elephiani-t they will lave to like the Scandinvians and tryv to ensure that TNCs go to a developing countiry tnot from
coliten(d with a numnerof grasping octopusies the WTO. it.s conmiittes fand huicaucraLV developnmient considslerations.i but foreconomic
in tiec shape ot TNCs. This is a prospect funcionnot as toxls )!1,NCs but as promoters advantages aIndL power l or their key
which deserves mucih mo-ire seriou. *attent ioln ol's stuc policies of tradc and.l d&vclopi-iitcii. burcaucrats,. They caan no doubt bring large
thiani it has dlone so far, especLially from tlhc asN woul re;dly he,ll;}1p the emacllipation ol'tl *tlie calpitall res,ources, valuatble techniiclal kniow-
point ot view ol( how thils danger cain be; p(x)rer sect ions: of thie wvorldlsdl)u!at ion. how and employment opportunities for local
miniimised. It is important from this standpollit to peoplc and also hel p mnlodLeniise theiroutlokx.
Witi the neiw T RIPS. TRIMS. GATS atnd ensure taiat (ij the WT() is not unlkduly But the price that has to he paid for all these
GATTYconditionalities. the cloutof theTNC.s deL)pledent onl a few r'ichl countries forl its nieeds also to be takeni into consideration by
is likely to increase enormously. Sma.iller finance, and (ii) its ctnimittee memnbers and the (levelopinig countries in particular. This
developing countries in particular will officers are selected on the basis of theil is not mere Swadeshi andl Swara . Potential
become a plaything of the rNCs. A few progressive dlevelopmcent outlook and advantages and disadvantages should be
biggerdeveloping counntries like Chinla. India. competence and not merely their expertise carefully weighed. Itmay he foolish to avoid
Brazil. etc, with large lhome market large in the fields (itf trade and financc. For the all such risks. But it woulde he wise to take
protected base for production for export te former. it would be use'lul to prescribe that only carieully calculated risks.
th lneighlin)uillg regioni.s m1iay get a .somncwlhat thc WT)O should not accept fromi anyv one But thcic should nol be also thoughtless
better dea1l frm the TNCs.. But thait would ountry more than i SPei ceint contribution bias against TNC.s. Thsc. e days giailintnationlal
also dlepenid uipon the strenigthl and integrity towards its total1 administrative expenses. corporation.i olten pose some of the (langers
of' tlheir governments, their caipaicitNiy to (In tact a timeic has bomec wlhcin at similar usually a.s.soc(cialed with TNCs to a much
mobilise thle suppoIrt of' otlhcer con'cernlic(d ceilinsg shiouldi be provided fkor IMF and larger-extenit. Theil- political clout, oligopoly
governments. implement firmly ititi- World Bank also.) As regards the latter, power and m.alplractices alrc otten much
mont)poly atin restic'tive pIractices c.i iliI aLwsWT() siioul recruit its senior officers 1rom greater thani those of TNC.s. On the other
and promote compenlition betwein TNC.s developninct ilgencies like thie UNCTAI), hainid, the TNC.s. especially if they come
from (lillerent countries as weIl as eiant UNID)O, FA0. etc.t aind( development- fronm severIai1 countries.'. provide very hiealthy
nationial corporatioIs. orientedA experts- frorr, goverinmelnts iand competition andi help promote el'ficietncy
But it may well be a losing i)attlc it the universities who halve proved their com- tand economic dcxcelopment. Thc position
niationatl oligar-clis I;fall prey to the loaves an1id mitment and compOtence to dvelCopM; :nt. would, however, be ve-ry diffetreint in
fishes dang,led by these corporations. No single country should lhave an uindtilv diflferent lv situaited developinig countries.
In f'act the wav tlhat the US succeeded in l'aige shliare of the senior posts. TNCs ustuall prefer t(o set up factories
breaking up the ol th.e -77 in the A numh beri ofcoaimmntators havet recently in countrics wlihich have comparative
, l ticniy
course of 0tIie Uruguay Round negotiations pointed out the undesirable features of the advanta,e in terms of niatural resources,
indicates tlIt this inmay be a real dancer to) WTO. TIRIPS. TRIMS, etc. fronm the disciplined and checap labour force, cntrepot
coniteni withi. A few o lthe morc important standlpoint of the developing countrics. IF facilities or large dlomestic inarket and
TNCs working together may prove even the G-77 had been united and alert, sonic political stability. The Patcific Asian eoun-
mnore powerl'ul in dividing the developing of thiese could have been obviated. Buit at tries offer mioc of these unlike many otlher
countries. in the WT( ) tlil the US I )epartment this latc stage. it would not be wvise for any G-77 counitries. It is important thXat Lhe
of Trade wI mn the old GATT. important developing country to stay out. G-77 countries (with thel helpol UNCTAD)
In tfiuture wh;.itevcr hielpful gzestures- and Instead they .should all join the WTO. restore should commi.ssioSRn carelul studies of the
the unity and eftfctivene.ss of G-77 andl act various falctoars mnent ioned above in
e:xpec t fro I8 1 hiv lumamli it arm1 in cosidelrationlconlcertedly to minlimi.se so)me of the.se formulalting their policiesv to)wardls TNCs;
otw the 1c1'c peop kle d government:lts of thec decfic;iencies. In thi.s context, what ha.s been andth ie role of the WTO.

2g04 Econiomic and Political Weekly October 22, 1994

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